The good weather market continues. The market continues to trade the idea that we are having great weather and will have a big crop. The result is low prices, especially in corn. We made a new contract low in December corn futures Aug. 4, at $3.20. We confirmed it Aug. 10.
Temperatures good
A few days ago, the market was talking up prices, and there was worry in the market as long-term weather forecasts were predicting soybean-hurting high temperatures for early August. In fact, the temperatures have been just high enough to be good for growth, not to hurt it.
The result has been that soybeans have stopped trading above $9 for November futures, as was seen in July, and are now trading just above $8.70. We were at $8.71, down most of a cent, Aug. 11, as this was being written.
Yes, we were up almost six cents, but the crop ratings came in from the United States Department of Agriculture Aug. 10, and they were unchanged, at 74% good and excellent for soybeans.
The USDA corn ratings were off 1%, to 71% good and excellent. Blame that on the Iowa ratings, which declined 4%. Much of Iowa has been dry recently, with some dry for two months. Add to that the damaging winds over much of that state yesterday. The damage is yet to be quantified, but December corn futures were up two cents Aug. 11, and that is the largest factor.
The USDA released the August crop production report Aug. 12. This is the market’s last good look at projected production before this year’s early harvest begins.
Ahead of trend-lines
Some farmers are hoping to get going in August in major parts of the Midwest. So far, the private estimates are for corn and beans to be ahead of trend-line yields. Rueters says we will yield 180.4 bpa on the corn, with some estimates several bushels higher. Pre-estimate privates have the soybeans at 51.3 bpa, a bushel and half ahead of last month’s USDA estimate.
As usual, the market will react to the report based, not on the actual yields, but the variation from expected numbers. Of course, there may be some difference between what traders think will be produced, and what traders expect USDA to report. This makes it hard to predict what the market will actually do when it reacts.
September report
More important than the August production estimates may be the September USDA grain stocks report. This will tell us the USDA estimate of the volumes of grain left in the country at the end of the marketing year, Aug. 31.
It has long been opined by many in the business that the stress of the horrible 2019 crop year weather has never been properly reflected in the USDA reports. That is, the idea that the crop productions were overestimated, and that the low test weight of much of the corn crop would reflect in higher usage in ethanol and feeding because of lower ethanol yield and lower feed conversion.
We have one last chance for USDA to correct this in the September grain stocks report.
China
The market also continues to watch the export commitments to China. Will they or won’t they meet the contracted commitments from the so-called Phase One agreement? The market thinks they will, and reports continuous sales of corn and beans.
The USDA does not reflect these exports in their balance sheet until the grains are actually shipped, through export reports. Analysts expect that actual shipments to China will be heavily weighted for the new crop period. The grains are cheaper then, and the condition will be assumed to be better than the late crop of last year.
Evidence is that China is heavily offering grain from government storage to internal private markets. This would seem like they are emptying out, and planning to re-fill with our new crop.
Prices, as I have said, have been reflecting the current weather. Our hope is that eventual export shipments and possibly changes in the grain stocks will give us reason to improve. If not, we must satisfy ourselves that big crops are a good thing, and we have a lot to sell.
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